Bethard Exits the UK – Is This a Sign of Things to Come?

Posted by Harry Kane on Friday, August 14, 2020

As anyone who has seen the recent proposals made by the All Party Parliamentary Group for Gambling Related Harm in the UK can testify, the iGaming market could be braced for significant change in the near-term.

Make no mistake; this has already begun to increase tensions between UK market operators and legislators, while increasingly the likelihood that more brands could leave Britain in the near future.

The Bethard Group is the latest to terminate its relationship with the UK market, and is scheduled to leave in July. But what are the reasons for this, and what does it mean for the market as a whole?

Targeting ‘Profitable Markets’ – A Common Theme in the UK

A number of lucrative iGaming brands and their parent companies have already exited the UK market during the last 12 months, including the Cherry AB-owned operator ComeOn.

The Swedish parent company cited a number of reasons for the decision, with the most prominent factor being the group’s desire to target “more favourable markets” and improve its financial performance by strengthening its position in the high-growth region of Scandinavia.

More specifically, the unexpected 6% hike in the RGD payable by iGaming brands (which was rolled out last year) compounded the financial impact of increased regulatory pressure in the UK, making it incrementally difficult for operators like ComeOn to maintain viable profit margins.

Of course, Cherry AB also took two other iGaming brands out of the UK last year, including the Mobile Bet and Get Lucky brands.

While we’ve already touched on the fact that Bethard is the latest operator to announce its intention to leave the UK, what’s telling is that the Malta-based brand has cited almost the exact same reasons for their departure.

The operator used almost identical language too, with the decision to leave following a strategic review of the company’s operation and ultimately motivated by a desire to focus on “profitable markets”.

Similarly, Bethard also maintained its desire to target the same high-growth markets identified by Cherry AB, including Sweden, Denmark and Ireland.

The UK was initially included in this list when Bethard earned their UKGC license in 2018, but this market is no longer deemed to be profitable or compelling from a management perspective.

The brand will also continue to target all European markets from its Maltese base, in a bid to simultaneously capture high growth and lucrative revenue streams in nations such as Italy.

This means that existing Bethard customers in the UK will have until August 10th to withdraw funds and clear their account balances, while they will be prohibited from placing bets from early July.

In addition to high profile brands such as ComeOn and Bethard, a variety of operators such as 188Bet, Betclic Everest and Royal Panda have also exited the UK market during the course of 2019/20.

This trend may be set to continue in the near-term too, with other brands taking the time at present to undertake a strategic review of their current operations.

Is This a Sign of Things to Come in the UK Market?

There’s little doubt that the UK market is placed on a knife edge at present, not least in the wake of the aforementioned report released by the APPG for Gambling Related Harm.

This report has made a number of far-reaching recommendations and ideas for reform, including a £2 online slots cap, a complete and blanket ban on all forms of iGaming advertising and and end to lucrative VIP programs.

Even when considered individually, changes such as the £2 slot gaming betting cap and the cessation of VIP programs would have a huge impact on the ability of operators to optimise their turnover and profitability, exacerbating the current market climate and potentially triggering a mass-exodus of operators nationwide.

It’s also important to consider the wider gambling market, with a host of nations throughout Europe offering more hospitable conditions for operators at present (especially from the perspective of taxation).

Take Spain, for example, which has recently made a number of gambling tax reductions as part of its 2018 budget. The headline changes saw a gross gaming revenue tax cut for online operators (from 25% to 20%), while the rate of tax charged in relation to pari-mutuel sports betting has been slashed by 2% to 20%.

In contrast, the RGD payable by UK brands is now fixed at 21%, meaning that Spain has joined Malta, Sweden and other nations in offering a more competitive landscape for iGaming brands to operate in.

The same principle also applies to semi-autonomous Spanish enclaves like Ceuta, which has been empowered to offer incredibly competitive tax rates to iGaming operators from across the globe.

This includes a 10% tax in the net profits generated through gambling activities, which sits alongside a 12.5% corporation tax and an 11.8% corporate contribution to social security.

So, by relocating from the UK to the Ceuta, it can be argued that operators will have the opportunity to significantly optimise their profitability while also maintaining access to the EU in the wake of Brexit.

The Last Word

The issue of Brexit is definitely compounding the issue facing the UK market at present, with Prime Minister Boris Johnson steadfastly refusing to consider extending the December 31st deadline for trade talks with the EU.

This is despite the socio-economic fallout from the Covid-19 pandemic, which is exacerbating the threat posed by a potential no-deal exit and causing even greater panic to spread amongst operators.

Even if we set Brexit aside, however, there’s a clear trend emerging in terms of operators leaving the UK to pursue more favourable and profitable markets. This highlights the increased regulatory and legislative pressure being placed on UK operators, which continues to squeeze profit margins considerably.

Ultimately, there’s still time for the marketplace to avoid a mass-exodus of UK firms, although we’ll almost certainly see more exits in the near-term. Much will depend on the extent to which the UKGC acts on the recommendations made by the APPG, and this will be an interesting space to watch in the future.